What increases the market value of your property

The real estate market and its growth is dependent on various factors. Investing in the realty market can reward you with good returns if the factors that affect the value of the property are in your favour.

Now the question is, what causes property value appreciation. Appreciation is a concept in real estate that defines the increase in property value because of certain factors that influence its rate. Real estate appreciation takes place because of factors like economic trends, household finances and consumer confidence, which are major drivers for the appraisal in the property value.

Factors causing appreciation

Population growth: The value of property increases when there are a huge number of consumers in the market. The population growth increases the demand for residential properties and this translates directly into appreciation in real estate rates. The increase in demand tends to increase in the value of any property, as it compels consumers to buy.

Inflation: Inflation is caused due to an excessive amount of money in circulation, which causes money value to fall. This leads to increase in land prices, construction materials, labour, legal building permits and a number of other things. This gives the builder a chance to cull out the invested value in a property, which is built or is under construction.

Another aspect of inflation can be positive for investors. Home buyers who invest in real estate can get good returns at the time of inflation.

"There is direct correlation between inflation, demand and price appreciation. In the economic dynamics, each of them plays their role for a price appreciation of the property. If there is increasing demand for homes in a certain area, property prices go up. Once demand generates it brings the investors, who buy properties in the area to sell them at a profit when supply slows down again. This causes property prices in that location to rise even further. Among other factors, inflation could result in a rise in the price of property as the cost of a number of things including the prices of land, construction materials, labour and legal building permits, go up. Thus, inflation and demand for a property plays a significant role to determine the price appreciation," says Aman Agarwal, governing council member, NAREDCO and director, KV Developers.

Infrastructure: The social and physical infrastructure is a major growth for the real estate market. Changes in the infrastructure in and around the property add an established liveability quotient for the consumers. Market drivers can be defined as developments in an area that increases the value of living there. Factors like new workspace, shopping malls, flyovers, schools and hospitals etc. all contribute in the appreciation. Projects that interlink localities to the neighbourhood areas also influence the price of the property. The better the infrastructure, greater will be the value.

Demand and Supply: The demand and supply is influential of human behaviour. Home buyers prefer locations which are sound in terms of infrastructure. Sometimes consumers are willing to pay more for a property because they find living in that location desirable. This demand again brings in the real estate investors, who buy properties to sell them at a profitable rate when supply slows down. This causes the property prices in that location to rise even further. The time for end-users to make their purchase is before the investor activity starts in earnest at locations with high appreciation potential.

Changes in nearby properties: Any changes in nearby localities can lead to changes in the property prices also. This factor is associated with infrastructure development and the population growth. Housing units, which are in prime desirable locations, are the ones with high prices. Any kind of growth and development can shift the demand and supply graph of a locality. The more it is in demand, higher will be the value.

The effect of Smart City planning

"The growth of a Smart City can give way to opportunities, particularly from the real estate perspective. These cities are considered a good bet for investors and buyers who are fetching their money for a longer run. At present, prices in these cities are reasonable. The potential for price appreciation is high with the implementation of the smart solution in the next couple of years," adds Agrawal.

Market study is the primary activity that requires attention before you decide the property value.